Before Federation: To 1900

Aboriginal trade was based on exchange, and did not involve the use of currency. Due to a lack of a
suitable currency, barter (as well as other forms of currencies) was used following British
colonisation.

The beginnings of a private enterprise economy emerged early however, promoting in time
the development
of banking and the currency. The discovery of gold in 1851 boosted this process.

Proposals for a national bank to issue currency notes emerged at times during the 19th century,
mainly in response to economic and financial crises.

Currency Chaos

Rum, Shinplasters, Holey Dollars & More

When the colony of New South Wales was established, no
provision was made for an internal currency. There were
no banks for some time and of course no central bank.
This produced a period of chaotic currency arrangements
and experiments in the colony.

In the early years, the colonists had to rely on barter
– the exchange of produce, goods and
services – and other makeshift
currencies such as rum (as all spirits were then
called).

Coin Shortage

Coin was very scarce in the early years with England
also suffering from a coin shortage.

The Spanish dollar was a major international currency
of the time. A shipment of Spanish dollars was sent
from England in 1792.

Coins from a range of other countries were also used
such as Dutch guilders and ducats, Indian mohurs and
rupees and Portuguese johannas. But much of this coin
left the colony as a result of trade with visiting
merchant ships.

Governor Macquarie also tried to remedy the coin
shortage by the creation of the holey dollar. He had
the centres of Spanish dollars punched out, leaving a
ring (the holey dollar) valued at 5 shillings and a
dump or core valued at one shilling and threepence.
Despite stiff penalties for exporting this coin, it
remained scarce.

The Commissariat, which controlled the issue of stores
to troops and convicts, bought goods produced by
private enterprise, paying for them with store
receipts. These receipts served as a medium of exchange
up to the 1820s but they were for unwieldy amounts. The
Commissariat began to issue its own notes, which were
equivalent to those of the Bank of New South Wales,
established in 1817.

Because of the persistent shortage of coin and the
limitations of other currencies, promissory notes or
IOUs also soon came into general use. Squatters'
cheques were a form of IOU in specific districts. These
IOUs, however, were vulnerable to forgery and had no
collateral backing.

Promissory notes became known as shinplasters, a term
describing a paper currency thought to be only worth
soaking in vinegar as a poultice for bruises. These
notes mostly fell apart quickly in the pockets or boots
of customers, thereby saving the issuer from having to
redeem them in coin.

From the late 1840s, copper tokens were issued by
businesses as small change to relieve the coin shortage
but, like paper IOUs, had no backing or official
guarantee.

British Currency

With no adequate solution to the currency problem, the
British Government had legislated a sterling currency
for the colony in 1825.

'Pounds, shillings and pence' remained in place as the
basis of Australian currency until the introduction of
the decimal system in 1966.

Gold and the Age of the Bank Note

The mining of gold from the 1850s set off a long period
of prosperity. Immigration increased rapidly. The
population tripled to three million between 1858 and
1889. The economy diversified. Urbanisation continued
with two thirds of the population living in towns by
the late 1880s. Melbourne was the largest city during
this time. The discovery of gold led to the minting of
Australia's own gold coins.

In 1853, Queen Victoria consented to the establishment
of a branch of the Royal Mint in Sydney. Branches of
the Royal Mint were also established in Melbourne in
1872 and in Perth in 1899.

The first mint was set up in part of Sydney's Rum
Hospital (in 1855 in Macquarie Street across from
today's Reserve Bank).

Australia's first gold sovereigns and half sovereigns
were turned out in 1855. By the late 1870s, Sydney and
Melbourne gold coins were accepted as legal tender in
Britain and most other colonies using British coin.

The gold rushes spurred the development of banking and
the issue by commercial banks of bank notes backed by
gold. The public, however, was often wary of these
notes, and they did not circulate widely. These bank
notes did not constitute a national paper currency.

In 1851 there were eight trading banks and 24 branches.
By 1890, 33 new banks had been launched and the number
of branches exceeded 1500.

Credit expanded rapidly, generating a speculative boom
during the 1880s. A depression followed in the 1890s.

Many of the banks which had developed during the gold
rush years failed in 1893. Though most reopened, this
major banking crisis reduced confidence in private bank
notes.

The bank failures resulted in the Queensland Government
withdrawing the right to issue notes from banks in
Queensland. It substituted them with Queensland
Treasury legal tender notes.

The crisis in the early 1890s, produced calls for a
national or central bank, uniform banking laws and a
national currency. The politics of Federation, however,
were the main focus of those days and these banking and
currency matters were left unresolved.

Australia's currency remained a mixture of British
copper, silver and gold coins, such as this 1901
sovereign (£1), Australian gold coins and
the notes of private banks and the Queensland
Government well into the period following Federation.

Aboriginal and Torres Strait Islander visitors should be aware that this Museum website may contain
images or
names of deceased people.
While we make every reasonable effort to ensure the accuracy of information, some of the content on this
site may contain inconsistencies or errors regarding dates, as recorded by different agencies or
individuals.